by Valentyna Jurkiw, Special Counsel
Ongoing climate change considerations have resulted in new ASIC reporting obligations coming into effect on 1 January 2025 under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Act 2024 (Cth) (Act). The new obligations form part of the climate change reforms underway which we referred you to in this Third Dimension Article last year. While these new obligations do not apply to everyone, they are nonetheless a good indicator of what is to come.
The Act introduces additional requirements for climate risk related financial disclosure. The reporting requirements apply mainly to large public trading companies. Not-for-profit organisations registered as charities with the ACNC are specifically exempted. However, as part of the evolving regulatory rubric it is worthwhile for charities and not-for-profits to understand these new regulations, especially if they seek to partner with and, therefore, benefit from the green credentials of a regulated entity.
The legislation applies to entities required to report under Chapter 2M of the Corporations Act 2001 (Cth) and which meet size criteria set out in the Act or which have reporting entity obligations under the National Greenhouse and Energy Reporting Act 2007 (Cth). Obligations under the Act are phased over two years commencing on 1 January 2025.
Regulated entities will be required to lodge an annual sustainability report with ASIC. The sustainability report needs to comply with Australian Sustainability Reporting Standards and include a climate statement which:
For the purposes of the scenario analysis component of the report requiring consideration of physical and transition climate related risks, physical climate related risks refers to matters such as disruption to productivity as a result of, for example, increased temperatures. Transition related climate risks refer to matters such as impacts to business arising from an entity’s transition away from fossil fuels or greenhouse gas emitting activities.
In the first three years of the regime, sustainability reports will need to include a directors’ declaration that, ‘in their opinion, the entity has taken reasonable steps to ensure the substantive provisions of the sustainability report are in accordance with the Corporations Act’.
From 1 January 2028, the “reasonable steps” qualification will be removed and directors will face a higher standard.
While charities and not-for-profits are largely exempt from this new reporting regime, directors and responsible persons still have obligations to act with care and diligence (under the Corporations law or the ACNC Governance Standards, depending on the nature of the organisation). In the charity context, charities also have obligations under the Governance Standards to account to members and take steps to ensure that public trust and confidence in the organisation are maintained. Accordingly, the new reporting regime could provide not-for-profit organisations with an important due diligence tool for the purposes of assessing collaboration opportunities involving green credentials.